1. To add VAT-free objects prescribed at Point 23, Section II of Part A as follows:

International transport means registry services, insurance services provided to international transport means such as insurance for ship hulls or aircraft fuselages, insurance for civil liability of ship owners or common civil liability for aircraft.

International transport means are those with international transport turnover representing over 50% of the total transport turnover of such means in a year; for international transport means being aircraft, they must have the international flight hours attaining over 50% of the total flight hours of such aircraft in a year.

In cases where international transport means are exploited and used by Vietnam-based transport business establishments, annually the transport business establishments shall base themselves on the preceding year's actual international transport turnover or international flight hours to register the lists of international transport means (made according to a set form) with the managing tax offices so that the latter can give certification for use as basis for non-collection of VAT on goods and services provided directly to international transport means. When selling goods and/or services to international transport means, business establishments (goods and/or service-providing establishments) must request Vietnam-based transport business establishments which use international transport means to supply the written international transport means registrations (copies certified and sealed by international transport means-using establishments) for registration with the tax offices. Establishments which provide goods and/or services to international transport means must make invoices, clearly stating the names and registration numbers of international transport means; serial numbers and dates of declarations of arrival of transport means or flight permits (for aircraft), for foreign transport means.

Goods and/or service-selling establishments must keep copies of the above-said registrations, goods and service sale invoices, goods and service sale contracts (if any), and goods and service payment vouchers. In case of via-agent sale, the goods and service-selling establishments must have records on debt clearance between such establishments and their agents, clearly stating names and volumes of goods and services sold to international transport means; serial numbers and dates of the written international transport means registrations; names and registration numbers of international transport means; serial numbers and dates of declarations of ship arrival or flight permits (for aircraft), for foreign transport means; and invoices of goods and services sold to international transport means.

In cases where new transport means are invested, procured and put into use, Vietnam-based transport business establishments shall base themselves on their business plans to determine international transport turnover or international flight hours in order to make registration with the tax offices under the above-said guidance. If the percentage of international transport turnover or international flight hours of the previous year is determined as failing to reach over 50% due to objective causes such as accidents or damage which needs repair, while such percentage in the plan year is over 50%, the enterprises must clearly explain such to the tax offices in order to carry out the procedures for registration of international transport means."

2. Point 14, Section II of Part A on VAT-free objects regarding public sanitation services is amended and supplemented as follows:

"14. Public services, such as sanitation, water drainage, maintenance of zoos, flower gardens, parks, street greenery, public lighting and funeral services, regardless of their payment funding sources.

Public services on street sanitation and water drainage include activities of gathering, clearing and treating garbage and waste matters, draining water and treating waste water for organizations and individuals, regardless of their payment funding sources. If business establishments make full use of waste matters for production of other products for sale, such products shall not be subject to VAT as guided in Section II, Part A of Circular No. 120/2003/TT-BTC, or be subject to VAT as guided in Section II, Part B of Circular No. 120/2003/TT-BTC. In cases where business establishments provide such services as cleaning offices of organizations and individuals, such services shall be subject to VAT at the rate of 10% as guided at Point 3.27, Section II, Part B of Circular No. 120/2003/TT-BTC.

The maintenance of zoos and parks covers activities of managing, planting trees, tending and protecting birds, animals and trees in parks, zoos, public places and national parks.

Funeral services include activities of leasing houses and cars in service of funerals by organizations providing funeral, interment and cremation services.

For activities with the collection of charges or fees according to the State's regimes on charges and fees, such collected amounts shall not be subject to VAT."

3. Point 1, Section II of Part B on the VAT rate of 0% is amended and supplemented as follows:

"1. The tax rate of 0% shall be applicable to export goods and services, construction and installation of overseas works and export-processing enterprises' works. Export goods and services include also goods processed for export; goods sold to duty-free shops; export goods and services which are not subject to VAT (excluding overseas tour services; overseas reinsurance services; overseas credit, financial investment and securities investment services; as well as goods and services prescribed at Points 23 and 27, Section II, Part A of Circular No. 120/2003/TT-BTC).

- Export goods include those exported overseas, including entrusted export, sold to export-processing enterprises, and those falling into cases regarded as export prescribed by the Government, such as:

+ Intermediate processed goods for export as prescribed in Article 17 of the Government's Decree No. 57/1998/ND-CP of July 31, 1998 detailing the implementation of the Commercial Law regarding the activities of goods export, import, processing as well as purchase and sale agency with foreign countries. This case shall apply to goods processed for export directly by the establishments under the processing contracts signed between such establishments and foreign parties (called the consignors), while the processed goods are not yet exported but delivered to other domestic units (called the consignees) designated by the foreign parties for further processing into finished products under the processing contracts already signed with the foreign parties, and the processing remuneration shall be paid directly by the foreign parties.

+ Goods consigned for export processing. In this case an establishment signs a processing contract directly with a foreign party but then signs another contract to assign the processing to another establishment. The establishment signing the processing contract directly with the foreign party shall only enjoy a commission from the processing remuneration.

+ Goods turned out by Vietnam-based enterprises and sold to foreign countries but delivered to other enterprises in Vietnam under the foreign parties' designation (called on-spot export goods for short) for use as raw materials for production or processing of export goods.

+ Goods exported for sale at overseas fairs and exhibitions.

- Export services and services provided to export-processing enterprises for use for production/business activities of the export-processing enterprises, except for services used for personal needs:

Export services are services which are provided directly to organizations or individuals abroad and consumed outside the Vietnamese territory if they fully meet the following conditions: service-providing establishments must have contracts signed with overseas purchasers according to the Commercial Law's provisions; overseas purchasers shall pay for services to Vietnam-based service-providing establishments."

4. To amend and supplement Point 2.27, Section II of Part B as follows:

"2.27. Preliminarily processed rubber latex, such as crepe latex, rubber sheet and crumb rubber."

5. To amend and supplement the third paragraph after Point 3.27, Section II of Part B as follows:

Repair and warranty services shall be subject to the VAT rate of 10%. Particularly, repair of machinery, equipment or transport means being mechanical products; services of registry of transport means and equipment shall be subject to the tax rate of 5%.

6. To add the following paragraph to Point 1.2c, Section III of Part B on determination of deductible input VAT for agricultural production, forestry and/or fishery establishments which organize closed production, make concentrated accounting of production/business results, and use products at the agricultural production, forestry as well as aquaculture and fishing stages as raw materials for further production or processing of VAT-liable products (including unprocessed export agricultural, forestry and fishery products or VAT-liable processed products):

Business establishments may declare and deduct VAT on goods and services purchased in service of production/business activities at all stages: capital construction investment, production and processing; in cases where the establishments sell goods being unprocessed or preliminarily processed agricultural, forestry and fishery products which are not subject to VAT, the amount of VAT on purchased goods and services shall be deducted according to the percentage (%) of the turnover of VAT-liable goods and services against the total turnover of sold goods and services. The VAT declaration and payment shall be made at their head-offices.

7. To add the following paragraphs to Point 1.2d, Section III of Part B on conditions and procedures for services provided to export-processing enterprises, construction and installation of overseas works and export-processing enterprises' works to be entitled to input VAT deduction or reimbursement:

- Establishments which provide services for export-processing enterprises, or conduct construction and installation of overseas works and export-processing enterprises' works must have contracts signed between the service-providing establishments and export-processing enterprises as well as foreign parties according to the Commercial Law's provisions.

- Establishments which provide services for export-processing enterprises, or conduct construction and installation of export-processing enterprises' works must make payment according to the guidance at Point 1.2.d3, Section III, Part B of Circular No. 120/2003/TT-BTC.

8. To add to Point 2, Section II of Part C on VAT declaration and payment some following cases:

- Business establishments which act as agents selling goods and services not subject to VAT and business establishments which act as agents providing post, insurance, and air ticket-booking services at the prices set by the agency principals for commission shall not have to declare or pay VAT on the turnover from goods and services sold through agents and on commissions earned from agency activities.

- Business establishments, which conduct construction or installation of works in localities other than where they are headquartered, have dependent units located in other localities, and pay VAT according to the percentage (%) of the turnover, when making VAT declaration and payment at their head offices, must make additional declarations in the monthly VAT declaration explanations on serial numbers of VAT declarations, payable VAT amounts, serial numbers of vouchers and VAT amounts already paid in localities where construction or installation works are located or where goods are sold so that the tax offices managing the business establishments can have basis for calculating the VAT amounts which have been already paid, are to be paid or excessively paid. When making annual VAT settlement, the business establishments must also obtain the certification of the tax offices of the localities where construction or installation works are located or where goods are sold on the arising VAT amounts to be paid and VAT amounts already paid.

9. To add the following paragraph to Point 3, Section I of Part D as follows:

When investment projects on establishment of new enterprises have been accomplished, and the procedures for business registration and tax payment registration have been completed, the business establishments being investment project owners must sum up the projects’ arising VAT amounts, the VAT amounts already refunded and the VAT amounts not yet refunded for transfer to newly set up enterprises so that the latter can make VAT declaration and payment and request VAT refund as prescribed with the directly managing tax offices.

10. To add the third emrule to Point 6, Section I of Part D as follows:

In cases where project owners entitled to tax refund are not business establishments or have no business registration certificates, they shall be entitled to tax refund only when decisions on setting up the project management boards are issued and the project owners authorize the project management boards to carry out the tax refund procedures.

11. VAT declaration and payment procedures:

a/ Promulgated together with this Circular are VAT declaration (form No. 01/GTGT); monthly VAT declaration explanation form No. 01B/GTGT and annual adjusted VAT declaration (form No. 11/GTGT) in replacement of VAT declaration (form No. 01/GTGT) and VAT settlement (form No. 11/GTGT) issued together with Circular No. 120/2003/TT-BTC.

(All forms are not printed herein).

b/ To adjust VAT declaration and payment for business establishments which pay tax by deduction method, conduct activities of purchasing and selling gold, silver, gemstones and/or foreign currencies, and pay tax by direct method:

- For goods and services with tax calculated by deduction method, business establishments shall make VAT declarations according to forms No. 01/GTGT, 01B/GTGT and 11/GTGT, issued together with this Circular.

- For activities of trading gold, silver, gemstones and/or foreign currencies, business establishments shall make VAT declarations according to forms No. 07A/GTGT and 12A/GTGT, issued together with Circular No. 120/2003/TT-BTC.

- Business establishments must also submit to the tax offices VAT declarations made according to the above-said forms No. 01/GTGT, 01B/GTGT, 11/GTGT, 07A/GTGT and 12A/GTGT.

- The VAT amounts to be paid by business establishments in the period shall be summed up from the arising VAT amounts in VAT declaration forms No. 01/GTGT, 07A/GTGT and 12A/GTGT. In cases where the input VAT amounts in the VAT declarations according to form No. 01/GTGT have not yet been fully deducted, and the payable VAT amounts arise in VAT declaration forms No. 07A/GTGT and 12A/GTGT, business establishments must not clear the input VAT amounts not yet deducted against the payable VAT amounts.

12. To amend and supplement Section IV of Part C on tax settlement as follows:

Business establishments which pay VAT by deduction method shall make and send annual adjusted VAT declarations (form No. 11/GTGT) to the tax offices.

The time limit for business establishments to submit their annual adjusted VAT declarations to the tax offices shall be 60 days as from December 31 of the adjustment year. The business establishments shall use the adjusted VAT data in the annual adjusted VAT declarations for making adjustment in the VAT declarations of February of the subsequent year. In cases where business establishments make adjusted declarations later than the time limit prescribed above, they shall make adjustments in the VAT declarations of the months when the business establishments have completed the annual adjusted VAT declarations.

Business establishments which are merged, consolidated, divided, separated, dissolved, bankrupt, transformed in terms of ownership or company form shall make VAT declarations according to form No. 01/GTGT and annual adjusted VAT declarations according to form No. 11/GTGT and send them to the tax offices within 45 days as from the dates the decisions on merger, consolidation, division, separation, dissolution, bankruptcy, ownership transforma-tion or company form change are issued.

Business establishments must bear responsibility for the truthfulness of the data in the annual adjusted VAT declarations; if business establishments make wrong reports in order to evade tax, they shall be sanctioned according to law provisions.

This Circular takes effect 15 days after its publication in the Official Gazette.

As from January 1, 2004, if business establishments provide services to export-processing enterprises and fulfill all procedures guided in this Circular, have already calculated VAT, made VAT invoices, made payment at VAT-inclusive prices, and made VAT declaration and payment, the business establishments and the export-processing enterprises shall make records on adjusting the payment prices at the 0% VAT rate and make VAT invoices for adjustment of VAT already declared for such invoices.

Any problems arising in the course of implementation should be reported by the concerned units to the Ministry of Finance for additional guidance.

For the Finance Minister
Vice Minister
TRUONG CHI TRUNG